How to Define & Measure KPIs for Your Business
If you work in a business, you have probably heard of a key performance indicator. Or if that doesn’t ring a bell, maybe its acronym is more familiar: KPI. If you have heard KPIs mentioned in meetings or emails and are still unsure about what they are and how they affect you, let me help you out.
Knowing what a KPI is will not only help you on an individual level, but it is also imperative to understand how to implement them and why they matter for a business. In this article, I will discuss why KPIs are important, how to measure them and what tools can help measure and track them.
So next time someone mentions KPIs in a quarterly meeting, you don’t have to feign ignorance — because you will already be in the know.
Why KPIs matter
At its most basic level, key performance indicators — KPIs — are metrics that you track to gauge the performance of your business. This could be anything from overall revenue to customer satisfaction levels. By monitoring specific KPIs, you can clearly see how your business is doing and identify areas that need improvement.
There can (and should) be more than one KPI you track, and these KPIs exist in about every area of business, from marketing to operations and software development. While different companies focus on specific KPIs that are important to them, some general categories are worth tracking for most companies. These include:
- Financial KPIs like revenue and profit margins.
- Customer KPIs like satisfaction levels and retention rates.
- Operational KPIs like business uptime and internal efficiency.
So why do KPIs matter? Tracking KPIs can help you make better decisions about where to allocate resources and how to improve your business. They can also help you identify problems before they spiral out of control and cause significant damage. KPIs provide a clear snapshot of how your business is performing. They zero in on areas where you might need to improve, which matters for any business that wants to stay ahead of the competition.
Challenges involved in measuring and tracking KPIs
Measuring and tracking KPIs can be challenging for any organization, large or small. However, a few key challenges tend to trip up even the most well-intentioned teams.
First, there’s the issue of data collection. To measure KPIs accurately, you need to have reliable data sources. Unfortunately, this can be difficult to come by, especially if you’re relying on manual data entry. Still, even if you have automated systems, human error is always possible.
Then there’s the issue of data analysis. Once you have your data, you need to be able to make sense of it. This can be tricky, especially when working with large data sets or if you don’t have a plan or know how to handle a large amount of information. You need to identify trends and patterns in the data and determine which KPIs are most important.
Finally, there’s the issue of transparency and communication. Measuring and tracking KPIs is only useful if you can communicate the results to decision-makers. This means clearly and concisely presenting the data so that it can be used to inform decision-making.
With these challenges in mind, it’s no wonder measuring and tracking KPIs can be challenging. However, it is possible to overcome these challenges and successfully measure and track your KPIs with careful planning and execution.
How to successfully measure your business KPIs
Since we are all now well versed in what pitfalls and missteps we can take on while trying to measure and track our KPIs, let’s take a look at the right way we want to track and measure. Here are a few tips for juggling your business KPIs:
Identify your KPIs
Choosing the KPI important to your unique business strategy is the foundation of success. You can have one overarching KPI goal for your business, such as “increase yearly revenue by X%,” or you can also set up smaller, more bite-sized KPIs like “make X calls this week” or “send out three reports in Q4.” From business-wide to internal team KPIs, remember you will have varying goals, metrics, and markers, so set these up strategically.
Set up appropriate tracking
Once you know which KPIs to track, set up a system for tracking them. This might involve creating custom reports in your project management system, or setting up proper integrations to connect Google Analytics with Salesforce or another CRM. Sharing information among your workplace tools will help you track all the relevant KPIs and metrics in one place, making it easier to see a comprehensive snapshot of your progress, analyze your data and make informed decisions.
Monitor your progress
Monitoring the progress of your KPI is a cinch if you set up and use the right tracking tools. You can easily track, monitor, and communicate your progress using Hive’s project management platform. With Hive’s built-in Goals application and customizable reporting and analytics dashboards, you can set up your check-ins regularly to help you spot trends and identify areas of improvement.
Review and adjust
Always remember to regularly review and adjust your KPI strategy. Just because an identified KPI worked well last month doesn’t mean it will still be effective this month. Regular reviews and communication with your team about specific KPIs will help keep your business strategy on track.
Choose meaningful KPIs
If you cannot ensure that your KPIs are accurate and meaningful, you will make the wrong decisions for your business based on faulty data. There are a few ways to build accurate and meaningful KPIs to avoid this.
- Measure the right things. Ask yourself whether the KPI you want to track is really indicative of the success or failure within your specific industry.
- Ensure your data is reliable. Build controls to prevent data entry errors, and consider using multiple data sources to cross-check information.
- Communicate with stakeholders. Getting buy-in and feedback from your team members is paramount to understanding whether the KPI you are tracking will be valuable.
Tracking and minoring the success of KPIs can be challenging, but once they are established, you will always be happy that you spent the time to get them done. When you can understand what KPIs are and how to measure them, you can make data-driven decisions that will lead to your overall business success, and you will always know what everyone is talking about in your next team meeting!
Do you track any KPIs in your business? How do you ensure that they’re accurate and meaningful?